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WACC CF1 CF2 CF3 CF4 CF5 Initial Outlay ($65,000,000) Cash Flows (Sales) $50,000,000 $25,500,000 $65,500,000 $45,000,000 $55,000,000 $25,000,000 $25,500,000 $25,500,000 $25,500.000 $25,500,000 Operating Costs (excluding Depreciation) (13,000,000) (13,500,000) (3,375,000) (10,125,000) Depreciation Rate of 20% Operating Income (EBIT) Income Tax (Rate 25%) After-Tax EBIT (13,000,000) 27,000,000 6,750,000 20,250,000 (13,000.000) (13,000,000) (13,000,000) 16,500.000 11,500,000 6.500,000 4,125,000 12,375,000 2,875,000 8,625,000 1,625,000 4,875,000 + Depreciation Cash Flows 13,000,000 13,000,000 13,000,000 13,000,000 13,000,000 17,875,000 ($65,000,000) 25,375,000 2,875,000 21,625,000 33.250,000 Select from drop down below: $15,404,422.60 ACCEPT NPV IRR 19% ACCEPT

WACC CF1 CF2 CF3 CF4 CF5 Initial Outlay ($65,000,000) Cash Flows (Sales) $50,000,000 $25,500,000 $65,500,000 $45,000,000 $55,000,000 $25,000,000 $25,500,000 $25,500,000 $25,500.000 $25,500,000 Operating Costs (excluding Depreciation) (13,000,000) (13,500,000) (3,375,000) (10,125,000) Depreciation Rate of 20% Operating Income (EBIT) Income Tax (Rate 25%) After-Tax EBIT (13,000,000) 27,000,000 6,750,000 20,250,000 (13,000.000) (13,000,000) (13,000,000) 16,500.000 11,500,000 6.500,000 4,125,000 12,375,000 2,875,000 8,625,000 1,625,000 4,875,000 + Depreciation Cash Flows 13,000,000 13,000,000 13,000,000 13,000,000 13,000,000 17,875,000 ($65,000,000) 25,375,000 2,875,000 21,625,000 33.250,000 Select from drop down below: $15,404,422.60 ACCEPT NPV IRR 19% ACCEPT

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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What is the difference between NPV and IRR?  Which one would you choose for evaluating a potential investment and why? Be sure to support reasoning with evidence for each capital budgeting metric (i.e., the NPV and IRR).

WACC CF1 CF2 CF3 CF4 CF5 Initial Outlay ($65,000,000) Cash Flows (Sales) $50,000,000 $25,500,000 $65,500,000 $45,000,000 $55,000,000 $25,000,000 $25,500,000 $25,500,000 $25,500.000 $25,500,000 Operating Costs (excluding Depreciation) (13,000,000) (13,500,000) (3,375,000) (10,125,000) Depreciation Rate of 20% Operating Income (EBIT) Income Tax (Rate 25%) After-Tax EBIT (13,000,000) 27,000,000 6,750,000 20,250,000 (13,000.000) (13,000,000) (13,000,000) 16,500.000 11,500,000 6.500,000 4,125,000 12,375,000 2,875,000 8,625,000 1,625,000 4,875,000 + Depreciation Cash Flows 13,000,000 13,000,000 13,000,000 13,000,000 13,000,000 17,875,000 ($65,000,000) 25,375,000 2,875,000 21,625,000 33.250,000 Select from drop down below: $15,404,422.60 ACCEPT NPV IRR 19% ACCEPT
Transcribed Image Text:WACC CF1 CF2 CF3 CF4 CF5 Initial Outlay ($65,000,000) Cash Flows (Sales) $50,000,000 $25,500,000 $65,500,000 $45,000,000 $55,000,000 $25,000,000 $25,500,000 $25,500,000 $25,500.000 $25,500,000 Operating Costs (excluding Depreciation) (13,000,000) (13,500,000) (3,375,000) (10,125,000) Depreciation Rate of 20% Operating Income (EBIT) Income Tax (Rate 25%) After-Tax EBIT (13,000,000) 27,000,000 6,750,000 20,250,000 (13,000.000) (13,000,000) (13,000,000) 16,500.000 11,500,000 6.500,000 4,125,000 12,375,000 2,875,000 8,625,000 1,625,000 4,875,000 + Depreciation Cash Flows 13,000,000 13,000,000 13,000,000 13,000,000 13,000,000 17,875,000 ($65,000,000) 25,375,000 2,875,000 21,625,000 33.250,000 Select from drop down below: $15,404,422.60 ACCEPT NPV IRR 19% ACCEPT
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